Order against Edex Production and Broadcasting Private Ltd. in the matter of Pyramid Saimira Theatre Ltd

1. The Securities and Exchange Board of India (hereinafter referred to as SEBI), vide an ad interim ex-parte order dated April 23, 2009 (hereinafter referred to as the Order), in the matter of Pyramid Saimira Theatre Limited (hereinafter referred to as PSTL), inter alia directed various persons/entities (as mentioned therein) including Edex Production & Broadcasting Limited (hereinafter referred to as EPBPL), not to buy, sell or deal in the securities market including in Initial Public Offerings (IPOs) directly or indirectly, till further directions, as they were prima facie found to be involved in the manipulation. The said entity prima facie appeared to have carried out suspicious banking transactions and channeled those funds, either directly or indirectly, in the stock markets. EPBPL filed its reply vide letter dated May 12, 2009. Thereafter, an opportunity of hearing was afforded to EPBPL on April 6, 2010, when Mr. Ajay Inder Sangwan, Advocate represented it and made submissions. Thereafter, written submissions dated April 8, 2010 was also filed.

2. I have considered the submissions made by EPBPL in its reply, the oral submissions during the hearing and other material available on record. In the facts and circumstances, the limited issue for consideration at this stage, is whether based on the available material and after considering the submissions made by EPBPL, the ex-parte directions issued by SEBI against it, in terms of the Order needs to be continued, revoked or modified in any manner. The circumstances which led to the passing of the Order had been mentioned in detail in the said order. The investigation in the matter of PSTL, prima facie revealed the operation of a widely distributed network of persons/entities who had joined hands in breaching market integrity by manipulating the shares of PSTL, forging a letter purported to be issued by SEBI to Mr. P.S. Saminathan (promoter of PSTL), publicizing its contents and the manipulators taking benefit of the artificial price rise caused by the said letter and selling off their substantial stake in the market to their advantage and to the detriment of the unsuspecting investors, carrying out suspicious banking transactions and routing those funds for securities market operations, offloading substantial shares at an artificial inflated price on December 22, 2008 etc. It was noticed that M/s. Om Associates had transferred funds into the account of Mr. Amol Kokane, who had traded substantially in the shares of PSTL. It was observed that prior to such money transfers, M/s. Om Associates had received funds from certain entities including from M/s. R.S. Enterprises. The preliminary findings of SEBI in the matter had inter alia observed that EPBPL had fund transactions with M/s. R. S. Enterprises, which in turn had transacted with M/s. Om Associates from whom the funds were prima facie found to have been routed to the stock exchange. Hence, in terms of the Order, the allegation against EPBPL is that, it appeared to have carried out suspicious banking transactions and channeled those funds either directly or indirectly in the stock markets.

3. EPBPL, in its reply had inter alia stated that it never had any business transactions with PSTL or any of its promoters, directors or associated company and that it did not purchase any shares of PSTL or indulged in any financial transactions. During the course of hearing, the advocate representing EPBPL submitted that EPBPL is dealing in the business of recording of music and hiring cinemas. He contended that the allegation leveled against EPBPL was ‘incorrect’. He further stated that while inspecting the documents pertaining to the matter (by the director of EPBPL), it was observed that Rs.10,00,000/- was transferred from M/s. Om Associates to Mr. Amol Kokane and then to M/s. R S Enterprises and further down to EPBPL. According to the advocate, the said transaction was the reason to prima facie allege that EPBPL had carried out suspicious banking transactions and channeled those funds in the stock market. While explaining the receipt of money from M/s. R S Enterprises, the advocate submitted that 20,000 shares of EPBPL were allotted to M/s. R S Enterprises (to Mr. Sunil Kumar Aggarwal and Mr. Ratan Kumar Aggarwal of the said entity) at a premium of Rs.90/- and the subscription money of Rs.20,00,000/- was paid by way of cheques (received during October 2008). The advocate submitted that the same was reflected in the book of accounts of EPBPL. In brief, it was contended that the money received from M/s. R. S. Enterprises was only towards the allotment of shares of EPBPL to it and that there was no other transaction with M/s. R.S. Enterprises. It was further submitted that EPBPL was not connected with Mr. Nirmal Kotecha and requested that the interim directions be revoked.

4. I have considered the submission that the fund transaction had by EPBPL with M/s. R.S. Enterprises was in respect of the allotment of shares of EPBPL to the latter. The preliminary findings of the investigation in the matter have revealed that there were fund transfers between M/s. R.S. Enterprises and M/s. Om Associates. As stated above, it was noticed that M/s. Om Associates had transferred huge sums of money into the account of Mr. Amol Kokane, who had substantially traded in the shares of PSTL. As monies have been remitted by M/s. R S Enterprises with EPBPL, it appeared that EPBPL was also involved in the layering of entities and a route for channeling of funds. In this regard, I note that EPBPL in its written submissions dated April 8, 2010 had submitted a copy of Form 2 (Return of Allotment, in terms of Section 75(1) of the Companies Act, 1956) to support its contention that shares were allotted to M/s. R. S. Enterprises. In terms of Section 75(1)(a) of the Companies Act, 1956, whenever a company having share capital, makes an allotment of shares, it has to file with the Registrar, a return of the allotment, stating the number of shares, nominal amount of the shares comprised in the said allotment, the names and addresses of the allottees and the amount, if any, paid or due and payable on each share. The copy of Form

2 submitted by EPBPL is not certified by the Registrar of Companies. Further, the details as required in terms of the aforesaid provision have not been mentioned in the said Form and the relevant columns have been left blank. Even the most relevant details like the name of the allottee, number of shares allotted and payment for the same have not been mentioned in the said form. In view of the same, the submission of EPBPL based on the said Form cannot be accepted. In such circumstances, EPBPL is not entitled to any benefit, at this stage. Further, I am of the considered view that the role of EPBPL should not be seen in isolation and that the case needs to be seen in its entirety in the light of the large scale market abuse that happened in the present case and channeling of funds through a web of entities, which have been explained in detail in the Order. Therefore, after giving thoughtful consideration to the submissions made on behalf of EPBPL, the other material on record and the facts and circumstances of the case, I find that it would not be appropriate to revoke the interim directions issued against EPBPL, vide the Order, at this stage. It goes without saying that, if the role of the parties in the manipulation is not brought out in definite terms by the ongoing investigation, necessary directions would be issued at an appropriate stage.

5. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B thereof, hereby confirm the directions issued against Edex Production and Broadcasting Limited, vide the ex-parte interim Order dated April 23, 2009, in the matter of Pyramid Saimira Theatre Limited.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

PLACE: MUMBAI DATE: JULY 5, 2010